New CEO's task: Fix Citigroup

NEW YORK — Citigroup, the country's largest bank and one of the biggest casualties of the turmoil in the credit markets, appointed Vikram S. Pandit as its chief executive Tuesday.

The bank also named Winfried F.W. Bischoff, the acting chief executive, as chairman, succeeding Robert E. Rubin, the former Treasury secretary who stepped into the role when Charles O. Prince III resigned Nov. 4.

The decisions were reached at a board meeting Tuesday afternoon.

Pandit, 50, joined Citigroup six months ago to oversee one part of the giant bank. Now, he confronts a more daunting task: shoring up the entire company, which has been brought to its knees by the mortgage crisis.

The decision places Pandit, a native of Nagpur, India, atop the iconic financial conglomerate at the most turbulent period since it was forged by a merger a decade ago. Prince resigned five weeks ago after announcing almost $18 billion in write-downs.

Fixing Citigroup will not be easy. Pandit has never run a public company, let alone one as big and complex as Citigroup. The company could face billions of dollars in additional losses on troubled home loans. Its stock price has fallen 40 percent this year, and its balance sheet is overstretched.

Pandit must determine whether the business should be broken up, as investors have prodded for years, or take one last stab at making the company easier to manage. He also must navigate the current market turbulence and chart Citi's overseas expansion.

Pandit is known more as an analytical technocrat than a charismatic leader. He has never managed a consumer banking business, an area now besieged by the deepening mortgage-related crisis and a struggling credit-card division. Pandit's candidacy gained strength in recent weeks as investors grew increasingly impatient with Citigroup's search.

John A. Thain, who was approached early on, took the top job at Merrill Lynch after it became clear that the Citi board would not quickly make a decision, according to people briefed on the search.

The selection of Bischoff as chairman was somewhat of a surprise. He has been with Citigroup since it acquired the British bank Schroders in 2000, and had the respect and trust of bank managers. Bischoff, 66, the head of Citigroup Europe, had been seen as a stabilizer when he was appointed to the interim role, and had not been considered a candidate for the job.

Pandit's ascension to the top job at Citigroup caps a remarkable Wall Street run for Pandit, who moved to New York from India at 16 to attend Columbia University. He eventually collected a doctorate in finance at Columbia and then took a job teaching at Indiana University in Bloomington.

"We assigned him problems we couldn't solve," said Rajnish Mehra, now a finance professor at the University of California, Santa Barbara, who served on Pandit's dissertation committee.

From Indiana University, Pandit joined Morgan Stanley as an investment banker and went on to head its institutional client division and was considered a potential heir to Phillip J. Purcell. But two years ago, he left that firm after being passed over for a promotion that would have put him in line to become chief executive.

Pandit then opened a hedge fund. Then in April, Citigroup bought Pandit's firm, Old Lane Partners, for an estimated $800 million, and put him in charge of its alternative investments unit.